Vanguard Target Retirement fund vs. Vanguard ETFs vs. DIY Portfolio

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maxgrowth
Posts: 28
Joined: Fri Feb 24, 2017 4:14 pm

Vanguard Target Retirement fund vs. Vanguard ETFs vs. DIY Portfolio

Postby maxgrowth » Mon Mar 20, 2017 1:02 am

I have $250K that I plan to invest to Vanguard to my taxable account. I don't know whether I should invest them into Vanguard Target Retirement index fund or Vanguard ETFs or DIY investment portfolio. I was informed that the Vanguard TR is not tax efficient. Should I go with ETFs or DIY portfolio? If so, what is the rule of thumb for me to choose certain Vanguard ETFs out of hundreds of Vanguard ETFs to maximize my investment growth?

I heard the 3-fund portfolio: (VTSAX 42%, VGTSX 18%, VBMFX 40% )or ( ETFs: VTI 42%, VXUS 18%, BND 40%). Which 3-fund portfolio should I go with? Is this asset allocation making sense? Which one is more tax efficient? Thank you.

onourway
Posts: 230
Joined: Thu Dec 08, 2016 3:39 pm

Re: Vanguard Target Retirement fund vs. Vanguard ETFs vs. DIY Portfolio

Postby onourway » Mon Mar 20, 2017 4:58 am

The general rule of thumb is to place your most tax-efficient assets in the taxable account. This usually means a broad market index fund like VTI or VOO. If you have a desire for international, something like VXUS might also be appropriate. If your tax bracket is 25% or higher, it's not typically suggested to keep standard bonds in your taxable account, but many hold municipal bonds like VTEB in their place. Balanced funds are an imperfect fit in a taxable account both because of the bonds they hold, and because of the inability to sell stocks independently of bonds, making any potential tax loss harvesting less efficient.

With $250k to use though, I'd be more likely to choose a mutual fund as the costs are the same as the ETF's and I think mutual funds are a bit easier to manage. The mutual fund versions of the tickers suggested above would all be fine choices, although we could give better advice with a bit more information about your overall situation - what this money is for, how this investment fits in with any other investments you have, etc.

aristotelian
Posts: 1579
Joined: Wed Jan 11, 2017 8:05 pm

Re: Vanguard Target Retirement fund vs. Vanguard ETFs vs. DIY Portfolio

Postby aristotelian » Mon Mar 20, 2017 6:33 am

DIY portfolio would have the most options for Tax Loss Harvesting, but would require a very carefully thought out plan and policies so that you avoid "stock picking" and "trading". You will get the most diversification for your investment using Vanguard funds. You can't go wrong with Vanguard funds, but you can certainly go wrong with DIY portfolio.

I would not do target retirement because it contains bond funds that pay dividends. You want to keep those in your IRA or 401k.

Chip
Posts: 1294
Joined: Wed Feb 21, 2007 4:57 am

Re: Vanguard Target Retirement fund vs. Vanguard ETFs vs. DIY Portfolio

Postby Chip » Mon Mar 20, 2017 6:48 am

Do you have tax-deferred and/or tax-free accounts? (401k, IRA, Roth)

maxgrowth
Posts: 28
Joined: Fri Feb 24, 2017 4:14 pm

Re: Vanguard Target Retirement fund vs. Vanguard ETFs vs. DIY Portfolio

Postby maxgrowth » Tue Mar 21, 2017 12:47 am

by onourway » Mon Mar 20, 2017 2:58 am

The general rule of thumb is to place your most tax-efficient assets in the taxable account. This usually means a broad market index fund like VTI or VOO. If you have a desire for international, something like VXUS might also be appropriate. If your tax bracket is 25% or higher, it's not typically suggested to keep standard bonds in your taxable account, but many hold municipal bonds like VTEB in their place. Balanced funds are an imperfect fit in a taxable account both because of the bonds they hold, and because of the inability to sell stocks independently of bonds, making any potential tax loss harvesting less efficient.

With $250k to use though, I'd be more likely to choose a mutual fund as the costs are the same as the ETF's and I think mutual funds are a bit easier to manage. The mutual fund versions of the tickers suggested above would all be fine choices, although we could give better advice with a bit more information about your overall situation - what this money is for, how this investment fits in with any other investments you have, etc.


To onourway: thank you so much for your valuable input. VBMFX is bond and I was suggested to put 40% into it. Should I just use VTSAX, VOO, VTI , VXUS to avoid any bonds in my taxable account? Is it ok the I can mix mutual funds and ETFs? Look forward to your advice! : :happy :D

maxgrowth
Posts: 28
Joined: Fri Feb 24, 2017 4:14 pm

Re: Vanguard Target Retirement fund vs. Vanguard ETFs vs. DIY Portfolio

Postby maxgrowth » Tue Mar 21, 2017 12:50 am

Re: Vanguard Target Retirement fund vs. Vanguard ETFs vs. DIY Portfolio
by aristotelian » Mon Mar 20, 2017 4:33 am

DIY portfolio would have the most options for Tax Loss Harvesting, but would require a very carefully thought out plan and policies so that you avoid "stock picking" and "trading". You will get the most diversification for your investment using Vanguard funds. You can't go wrong with Vanguard funds, but you can certainly go wrong with DIY portfolio.

I would not do target retirement because it contains bond funds that pay dividends. You want to keep those in your IRA or 401k.


I completely agree. I have target retirement in my IRA and 401K. Thank you. :D


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